Public cloud providers Amazon Web Services (AWS), Microsoft Azure and Google Cloud control a whopping 65% of the growing global cloud market, but long-time hyperscale leader AWS struggled to post first-quarter growth like that of its main rivals, according to new data from Synergy Research Group (SRG).

Cloud infrastructure services spending grew 20% year-over-year during the quarter to reach more than $63 billion in revenue, fueled by "the foundational benefits of cloud adoption," SRG Chief Analyst John Dinsdale wrote. Public infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) represented the majority of the market and grew 21% in Q1.

Even though Microsoft (with 23% of the market) and Google (with 10%) each gained just one percentage point of market share year-on-year, that's more than AWS can claim, which continued to hover around 32% market share.

While today's macroeconomic climate "has constrained some growth in cloud spending," the market's current rate of expansion remains healthy, Dinsdale noted.

Here's a rundown of the Big 3's first-quarter earnings highlights.

Google Cloud is more than a cash-eater now

Google Cloud is finally turning a profit for the company, with Alphabet CEO Sundar Pichai sharing the cloud unit "delivered profitability this quarter." This news follows investor concerns about the cloud segment's millions of dollars in operating losses despite the reported 32% year-over-year revenue growth in Q4 of 2022.

During the company's latest earnings call, Pichai credited Google Cloud Platform's (GCP) $7.5 billion in Q1 revenue and 28% year-on-year growth to Google's relationships with large enterprises, the strength of its partner ecosystem and "product leadership."

"We are leaning into optimization," Pichai noted. "I mean, this is an important moment to help our customers, and we take a long-term view," he told investors.

Alphabet CFO Ruth Porter noted this quarter's slower cloud consumption growth was due to cost optimizations that reflect the uncertain macroeconomic backdrop.

"We are very pleased to be at this level and are continuing to focus on profitability and long-term value creation here," Porter added.

Microsoft leans on OpenAI to gain market share

Microsoft's cloud business, which generated $28 billion in Q1 revenue and 22% year-on-year growth, was driven in part by the provider's partnership with OpenAI as the ChatGPT creator's sole cloud infrastructure provider.

"Think about the consumer tech companies that are all spinning essentially Azure meters because they have gone to OpenAI and are using their API. These are not customers of Azure at all," CEO Satya Nadella said during the company's earnings call.

In a similar vein as Google, Microsoft is seeing its existing customers look to optimize their cloud spend, and CFO Amy Hood noted Azure "customers continued to exercise some caution as optimization and new workload trends from the prior quarter continued."

Investors, however, seemed nervous about how much of that IaaS and PaaS consumption slowdown is due to economic issues versus "something more fundamental" about the technologies.

"Optimizations do continue. In fact, we are focused on it," Nadella said. "In the long run, that’s the best way to secure the loyalty and long-term contracts with customers, when they know that they can count on a cloud provider like us to help them continuously optimize their workflow. That’s sort of the fundamental benefit of public cloud and we’re taking every opportunity to prove that out with customers in real time," he explained.

Microsoft is seeing new workloads and new customers join "in addition to highly intense optimization" from existing cloud customers, Nadella added.

AWS stays optimistic on cloud optimization

Amazon CFO Brian Olsavsky reported during the company's Q1 earnings conference that AWS saw $21.4 billion in Q1 revenue at 16% year-over-year growth, which was four points lower than the previous quarter's growth.

"As expected," Olsavsky noted, the hyperscaler's customers are searching for pathways to cloud spending optimization "in response to these tough economic conditions," he explained.

Like Google and Microsoft, AWS is working to save its customers money in the cloud, but the hyperscaler is also doubling down on attracting new workloads from legacy on-premises environments.

"We're working to build customer relationships and a business that will outlast all of us," Olsavsky said. "Therefore, our AWS sales and support teams continue to spend much of their time helping customers optimize their AWS spend so that they can better weather this uncertain economy."

In response to investor concerns over the company's role in not actively squeezing every possible penny from its customers, Amazon CEO Andy Jassy drew a clear line between optimization and cost-cutting. "It's important to remember that customers are pretty explicitly telling us that this is not a cost-cutting effort" but a reprioritization of "what matters most to our business at this time," he said.

Jassy also highlighted what he considers to be significant potential for new AWS cloud customers migrating from on-premises environments. "People sometimes forget that 90-plus percent of global IT spend is still on-premises," he said. Thanks to the scalable nature of cloud infrastructure, customers with reduced compute demand "can give it back to us and stop paying for it, and that is not true with what you see on-premises. And so, we're trying to work hard to help customers with that," he explained.

Jassy remains optimistic about the future of Amazon's cloud services. "We like the fundamentals of what we're seeing in AWS. The new customer pipeline looks strong. The set of ongoing migrations of workloads to AWS is strong," he touted.